CENDANT: Orbitz purchase to fill business gap

CHICAGO TRIBUNE

Cendant Corp. went shopping again last week and plugged one of the holes in its business by agreeing to buy Chicago-based Orbitz Inc. for $1.25 billion.

The company is already one of the world's biggest travel and real estate service providers, thanks to acquisitions of major brands such as Ramada, Days Inn and Century 21. The acquisition of Orbitz would help Cendant fill a void in its travel businesses.

"One glaring hole to their business is they didn't have a solid platform in the form of a first-class travel agency," said Tim Fidler, director of research for Chicago-based Ariel Capital Management. "By going out and picking up what I think is a good company, they have a very good underlying set of businesses from which they can build."

But Cendant won't be the only beneficiary. The five airlines that founded Orbitz in February 2000 will see a hefty return on their investment of $214 million, said Jeffrey Katz, chief executive of Orbitz.

The carriers--American, United, Delta, Northwest and Continental--stand to reap more than $730 million combined in the deal, expected to close next month.

What's next: Seeing how Cendant can differentiate Orbitz from competitors like Expedia and Travelocity. "I think that's the potential downside," said George Novak, an industry analyst at Georgetown University. "Was Orbitz the right one to go after?"